Edited version of private advice

Authorisation Number: 1012626696780

Ruling

Subject: Home to work travel - alternate work place - business trip on way to work

Question 1

Are you entitled to claim a deduction for the cost of travelling directly between your home and your regular place of work, or directly between your regular place of work and home?

Answer

No.

Question 2

Are you entitled to claim a deduction for the cost of travelling from your home, to a client's premises and then onto your regular place of work (and vice versa)?

Answer

Yes.

Question 3

Are you entitled to claim a deduction for the cost of travelling from your home to visit a client at their premises, and return?

Answer

Yes.

This ruling applies for the following period

Year ended 30 June 2013

The scheme commences on

1 July 2012

Relevant facts and circumstances

You are self-employed.

You have a regular place of work.

You also visit clients at their premises.

You are also required to be 'on-call' after hours.

You transport equipment required for your work in your vehicle. The equipment is not bulky or heavy.

You consider that transporting the equipment by any means other than your vehicle is precluded by privacy, safety and theft issues.

In addition, you argue that your client's premises are often not accessible by public transport, and taxis may not be available at the time you need travel.

The types of travel undertaken include:

• from your home to your regular place of work, and from your regular place of work to your home

• from your home to a client's premises and onto your regular place of work, and

• from your home to a client's premises and return.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Reasons for decision

You can deduct from your assessable income any loss or outgoing to the extent that it is incurred in gaining or producing your assessable income except where the loss or outgoing is capital or private in nature (section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)).

The expenses of travelling between home and a place of work are generally not deductible as these expenses are of a private nature (Lunney v. FC of T (1958) 100 CLR 478 (Lunney's Case)).

Lunney's Case considered the issue of whether fares paid by taxpayers to enable them to go day by day to their regular place of employment and back to their home are deductible. The Full High Court held that the costs incurred by a taxpayer in travelling to the place where they regularly work are expenses incurred in order to enable them to earn income but are not expenses incurred in the course of earning that income.

The principle in Lunney's Case (that the cost of travel between home and work is generally incurred to put you in a position to perform your duties, rather than in the performance of those duties) has been considered in numerous more recent decisions. These decisions confirm that the general principle is not altered by the availability of transport, the lack of suitable public transport, the erratic hours and times of the travel, or the 'on-call' nature of the work.

Any confidentiality or privacy issues in respect of the equipment transported to and from work, as well as any safety or theft issues, are not considered relevant in determining the deductibility of travel expenses. The fact that a taxpayer may travel to and from their regular place of work while 'on-call' would also not ordinarily alter the character of that travel (Taxation Ruling MT 2027 Fringe benefits tax: private use of cars: home to work travel).

However, there are certain circumstances where it has been accepted that the cost of travelling between home and a regular place of work is deductible, such as:

• where the taxpayer is required to carry bulky equipment

• where the taxpayer's work is itinerant, or

• where the home can be regarded as a base of operations.

Transport of bulky equipment

In your case, you transport equipment in your vehicle. While this equipment may be necessary for your work, it is not bulky, and as such the fact that it is transported in your vehicle does not change the nature of your travel.

Itinerant work

A deduction is allowable for the cost of traveling between home and work if an employee's work is itinerant.

Taxation Ruling TR 95/34 Income tax: employees carrying out itinerant work - deductions, allowances and reimbursements for transport expenses provides guidelines for establishing whether an employee is carrying out itinerant work, and states that the following are indicators of itinerancy:

• travel is a fundamental part of the employee's work

• the existence of a 'web' of work places in the employee's regular employment, that is, the employee has no fixed place of work, and

• the employee continually travels from one work site to another. An employee must regularly work at more than one work site before returning to his or her usual place of residence.

However, MT 2027 provides that there will be cases where, while the nature of the work is not inherently itinerant, a taxpayer will be required in the ordinary course of their duties to visit clients. In such cases, the total journey from home to the client's premises and on to the office is deductible where:

• the taxpayer has a regular place of work to which he or she travels habitually

• in the performance of his or her duties travel is undertaken to an alternative destination which is not itself a regular place of work, and

• the journey is undertaken to a location where the taxpayer performs substantial work duties.

In your case, while you undertake some travel to client's premises, travel is not a fundamental part of your work. You have a regular place of work and you do not continually travel from one work site to another. As such, your work is not inherently itinerant.

However, while your work is not inherently itinerant, you are entitled to a deduction for the cost of travelling from home to visit a client and onto your regular place of work (and vice versa).

You are also entitled to a deduction for travel expenses incurred when you travel from home to a client's premises and home again.

Home as a base of operations

A taxpayer's home may constitute a base of operations if their work commences at or before the time of leaving home to travel to work and the responsibility for completing it is not discharged until the taxpayer attends at their regular place of work. Whether a taxpayer's home constitutes a base of operations depends on the nature and extent of the activities undertaken at home.

In your case, when you are travelling from your home to your regular place of work you do not commence your work before leaving home, you are simply travelling from home to work. As such, your home is not regarded as a base of operations.

Conclusion

You are not entitled to a deduction for travel expenses incurred to travel in either direction between your home and your regular place of work. These expenses are not incurred to gain or produce your assessable income; rather, they are incurred to enable you to commence, or return home after completing, your income earning activities. These expenses are considered to be private or domestic in nature.

However, you are entitled to a deduction under section 8-1 of the ITAA 1997 for the cost of travelling from home to a client's premises and onto your regular place of work.

You are also entitled to a deduction for travel expenses incurred when you travel (in either direction) between your home and a client's premises. These expenses are incurred in the production of your assessable income.